What will insurance look like in 2036? No one knows for sure, but chances are, sales and underwriting will be transformed by evolving consumption habits and technology.
The 2016 Insurance and Investment Convention held in Montreal in November was capped off with a panel that envisioned the insurance landscape two decades from now. The event was held to underline The Insurance and Investment Journal 20th anniversary. Marketing gurus and industry players expressed diverse and contrasting views.
Jacques Nantel, professor emeritus at HEC Montréal, predicts that trade will flow through myriad channels. Insurance is no exception. “It’s not about choosing between the Internet and the physical presence of an advisor. Consumers want both methods,” he says.
The underwriting process will involve gathering information online, before the client decides to talk to a representative to complete the purchase. “We will need both [technology and people], just as we need to both eat and drink,” Nantel adds.
Pierre Vincent, vice-president, Individual Insurance, at iA Financial Group, says that the aging demographics will alter customers’ needs and the makeup of the sales force. “There will always be people who will need insurance to cover risk related to mortality in their prime. Other customers who will live well beyond their 80s may never see the value of insurance. Advisors must help their customers protect themselves from longevity risk, and change their approach to offer critical illness or disability insurance,” he explains.
Nathalie de Marcellis-Warin, CEO of the Center for Interuniversity Research and Analysis of Organizations (CIRANO), expects to see more clientele segmentation. Each stratum will have its particular needs, which will have to be covered well. “The new generations will have very different needs,” she points out.
Insurers must diversify their product lines, she adds. “It’s a major challenge for your industry.” Advisors will also have to find the right language to reach populations with varied and different needs.
Nantel points out that studies of younger consumers’ behaviours show that their decision process in insurance is shaped mainly by the Internet and social media. “Friends of Millennials will always be seen as more credible than an advisor or expert quoted on a site, and this will not change over time,” he says.
The complexity of insurance products should not be the only factor that determines the need to talk to an advisor, because clients may choose to sidestep the process instead of tackling it head on, Nantel continues. “Many consumers will probably be willing to assume a higher risk in exchange for an easier application process,” he explains.
In 20 years, consumers will still be questioning the value of insurance, Vincent adds. “People will always wonder whether they need insurance. Consumers will still need an advisor to help them ‘take the leap.’”
Jettison the jargon
Eliminating the jargon from insurance policy clauses is up to the industry, not consumers, Nantel says. If policies are still too complex and coverage does not meet people’s needs, the industry is shooting itself in the foot. “In 20 years, 30-year-old customers will not read the policy more than people are doing now,” he says.
Customers imagine a variety of scenarios where they would need the coverage offered, and advisors will have to prove that their products meet this need. “Consumers no longer think in technical terms; they are more concerned with the results. This is true for all consumption products, including insurance,” Nantel says.
Marcellis-Warin agrees with Nantel. She says that her students demonstrate daily that they want things to go quickly, even skipping the initial instructions. “They don’t always read my emails, and they misunderstand the instructions just because they’re in a rush. They read crosswise to get through it more quickly.”
Eric Sondergeld, LIMRA vice-president and director, claims that Canadian insurers are ahead of their American counterparts when it comes to inviting their customers to apply for a policy online. He admits that the terminology used in policies is complex. He thinks insurance is a fairly opaque sector. Ultimately, insurers may simplify the products and better inform consumers. “It won’t happen overnight,” he says.
Sondergeld thinks that advisors will each define their target groups and some customer segments will be left without advice. “Advisors cannot reach everyone, but it is true that a portion of the clientele is never solicited directly. These customers must undertake the process themselves, or they will never buy the product,” he explains.
The sales force is also aging, Pierre Vincent underlines. Older advisors do not necessarily talk to their customers’ children. Most advisors are not looking for more customers, they just want to serve their existing ones better. Technology can help them here, by cutting down on paperwork and accelerating the risk assessment and policy approval process.
iA Financial Group has launched an online underwriting process where customers can chat with a certified representative at any time. In seven months, 20% of the insurer’s policies have been underwritten online. The average is 12 minutes per transaction. Over that period, 2,500 polices have been sold this way. “The need is there, and it’s the younger people who want this process,” Vincent says. In 20 years, paper applications will probably disappear, he adds, even for complex products.
Sondergeld emphasizes that online underwriting is still a voluntary process and that insurers should not pressure their sales force to adapt by making it mandatory. He agrees with Pierre Vincent that consumers will decide whether they want to purchase insurance with an advisor on hand, and by signing paper forms, or not.
We are already seeing the effect of technologies on the mortgage loan insurance market, where customers can find out very quickly if they are covered or not, Vincent continues. Customers will shun advisors who use obsolete technology that slows down the process
Using technology to simplify underwriting
Jacques Nantel, an expert in retail trade, argues that while many chains have failed to follow market trends, players have surfaced to satisfy new needs.
The retailers left standing are those that use technology to serve customers better. “If insurance continues to use technology only to push customers to buy a product that is essentially unsuitable, it is not going to work,” the HEC Montréal professor said durinig a panel at the recent Insurance and Investment Convention that envisioned the insurance landscape two decades from now.
In insurance, technology must serve to simplify the underwriting process. Otherwise customers will continue to look elsewhere. “Everything that is purely technical will be done by robots because it does not add value. Everything that is creative, that personalizes the product, will remain in advisors’ hands for a long time to come,” Nantel explains.
He argues that markets are not static. By 2036, the industry will have to cover illnesses associated with aging that we are oblivious to in 2016. The tools insurers and their intermediaries use must be constantly finetuned to keep pace with the market, he says.
He recalls that in 1998, at the first conference where he spoke about e-commerce to an audience of professionals, only 2.4% of Quebec households were connected to the Internet. Why should people have even thought about e-commerce then? Because the market was growing, he explains. You should not wait until a large number of customers are clamouring for change before you act. “Those who benefit the most from technological changes are those who adapt to it gradually,” he says.
Nathalie de Marcellis-Warin, CIRANO CEO, says robots are doing tasks without value. “The data can help us analyze needs better and underwrite the right insurance product, so why shouldn’t we use it?” she asks. Customers need access to an advisor for more difficult questions, she adds.
Progress linked to artificial intelligence will let robots process a wide variety of data in real time, she continues. It will go way beyond programming and algorithms. She thinks insurers should use technology to devise better insurance products, which includes the gathering of in-depth health data.
Pierre Vincent, vice-president, individual assurance, at iA Financial Group, points out that advisors can already use technology to keep attuned to consumer’s needs—just keep a close eye on social media: a move, a death, an upcoming birth, a new car, etc. “We need to focus on the human side and be there at the important times. I think this will help our advisors reach more people,” he says.
He predicts that risk planning will be increasingly automated, and will allow insurers to offer customers the best prices more quickly. Calculation power will also improve, which will enhance data analysis. Vincent mentions that experts told him that in five years, risk selection may be done entirely automatically, even for higher guarantees.
All the same, customer needs analysis and compliance rules will always be around. A poorly designed automated system is not a panacea.